Business

Prices of imported goods to rise with new shipping law?

  • New global shipping law to cost shipping companies
  • Costs may be passed onto importers
  • Set to come into effect on 1 January

By Madhusha Thavapalakumar

Sri Lanka may see a rise in the prices of imported goods in 2020 due to a new environmental standard that will come into effect in January for the shipping sector, The Sunday Morning Business learnt.

The International Maritime Organisation (IMF) 2020 Global Sulphur Cap is an international requirement laid for the global shipping industry and it will come into effect from 1 January next year. Under the requirement, all sizes of ships have to use fuel oil that meets the 0.50% sulphur limit from 1 January 2020.

Shippers’ Academy Colombo (SAC) CEO Rohan Masakorala noted that in order to implement the new requirement, ships have to go through several costly upgrades that could in turn result in a hike in shipping charges.

“There is a likelihood; increases in shipping charges can be expected because the implementation of this requirement is an expensive affair. The cost will possibly be passed onto the importers,” Masakorala told The Sunday Morning Business.

As the additional cost that would be incurred through the implementation of the sulphur requirement is very much likely to be passed onto the importers, The Sunday Morning Business spoke to Ceylon Chamber of Commerce Chairman – Import Section Delano Dias.

Dias told us that if the importers are to incur an additional cost due to the requirement, the cost will be passed down to the consumers.

“The additional cost that will be borne by us will reach the customer who is at the end of the chain,” he noted.

He was certain that there would be a hike in shipping charges as ships that fail or are unable to comply with the requirement will be removed from business and the industry will be left with a lesser number of ships.

Meanwhile, The Sunday Morning Business also spoke to Tile and Sanitaryware Importers Association Secretary General Mohamed Kamil Hussain and he expressed his disappointment over the industry passing down the additional cost incurred to the importers instead of absorbing it themselves or passing it onto the Government.

“In other countries, the respective government absorbs such additional costs without burdening importers and customers more and more. If they’re passing it down to us, we also can’t help but pass it onto the customers and lose business,” Hussain noted.

Speaking further, he noted that even if it is to be passed down to importers, certain concessions should be granted when shipping raw materials.

He went on and noted that importation of raw materials is inevitable as Sri Lanka undertakes value addition locally and re-exports globally. He noted that in such cases, raw materials would become expensive with the addition of increased shipping charges which will either result in exporters losing markets to lower priced exports or absorbing the additional cost themselves, or ending up with a low profit or no profit at all.

“Already, the prices of raw materials are higher with the dollar prices going up. This shipping charge hike is adding more fuel to the fire. If we spend so much on raw materials and re-export for higher prices, we might even lose global market share due to the higher pricing,” Hussein noted.

Further, he encouraged the Government to look at alternative methods in such scenarios instead of always increasing the prices as it would support neither the development of trade nor the economy.

However, The Sunday Morning Business also spoke to the Ceylon Association of Shipping Agents (CASA) Secretary General Ralph Anandappa where he noted that it is too early to comment on any possible hikes in shipping charges.

“None of our members have informed us that they would increase shipping charges and there is no indication of it happening. Anyways, it is too early to decide now,” Anandappa noted.

He also added that the members of CASA are all prepared to comply with the sulphur requirement from January 2020.

The requirement was decided to be implemented at the 70th session of the Marine Environment Protection Committee (MEPC) held in October 2016.

Under the IMO’s MARPOL Convention, ​​​the International Convention for the Prevention of Pollution from Ships for the prevention of pollution from ships, the new sulphur content of fuel oil used by ships is an 80% cut from the current 3.50% limit. The regulation applies to all ships.

According to the IMO, limiting sulphur oxide emissions from ships will improve air quality and protect the environment as often, the sulphur oxide that emanate from ships cause major health and environmental issues for the world, particularly for populations living close to ports and coasts.